Is it sufficient when Assessee was under the bona-fide belief that the report u/s 92E is not required?

Karvy Computershare Pvt. Ltd. vs. ACIT-  (Hyderabad Tribunal)- July 2017

Question of law: whether "Appellant was under the bona fide belief that the report under section 92E is not required as it has paid the royalty after obtaining the RBI approval" is sufficient to plea for deletion of penalty under section 271BA"

Important points/ facts discussed (summarized for easy reference)-

1) It was deliberated by AO-"Statute casts clear obligation on the assessee to furnish report in form no. 3CEB within 'due date. This obligation is compulsory. The specific purpose for imposing such obligation was to ensure that the assesses who are entering into international transactions would report them. Ignorance of law is no excuse, more so when the assessee engages qualified professionals for audit and representations

2) It was further mentioned by the AO " Obtaining permission for payment of royalty from RBI or any other government authority is a totally different process and there is no exception u/s 92E or rule IDE for such a case. The assessee cannot decide for itself that report in form 3CEB is not necessary"

3) "The adjustment to ALP is not a criterion to determine whether there is default or not. It is quite unlikely that the Department would have noticed that there are international transactions because 3CEB report is the only source from which the Department would get' to know the same. On account of the default of the assessee, this opportunity was deprived to the Department."

4) Further very important fact mentioned by the department "Firstly, there is no column in audit report u/s 44AB on international transactions. If such were the case, there was no need for the Government of India to prescribe a specific report on the Act/Rules vide form no. 3CEB. Secondly, as already referred, if the case were not selected in scrutiny, the Department cannot cone to notice of the international transactions at all without 3CEB report"

5) It was also said by the AO" The assessee can escape from the levy of penalty, if he can establish reasonable cause. In the present case, no such reasonable cause is established by the assessee except stating that no adjustment was made to ALP"

6) Learned court said "  Mere ignorance and bonafide belief that will not be considered as reasonable cause to delete the penalty. It is clearly the obligation on the part of the assessee to comply with the provisions of section 92E. Hence, the action initiated by the AO in levying penalty u/s 271BA is proper in these cases. Accordingly, we uphold the order of the CIT(A) in confirming the penalty levied by the AO"

For full text please refer https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Taxpundit_Reporter_2017/August_2017/817Taxpundit35.pdf

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